Now It's eBay That's Supposedly Ridiculously Overpaying For Skype
from the make-it-stop,-please... dept
No, please. Make it stop. Seriously. We thought that Skype's hype bubble might be deflating a bit after people began to realize that Google, Yahoo and Microsoft were all in a position to offer a nearly identical offering. However, the Skhype continues. We laughed at the ridiculous suggestions all the way up the chain. It started when Skype, a company that most assume makes somewhere between $10 million and $50 million, was being valued at $1 billion, no $3 billion, oh wait, it's the mind-blowingly ridiculous $6 to $10 billion. It seemed like each rumor was built upon the earlier one -- all in the course of a single month. It was almost getting too silly to pay any attention to, but here come the rumors again. Two separate sources are now claiming that eBay is on the verge of buying Skype for somewhere between $2 billion and $5 billion. The two sources are the Wall Street Journal (saying $2 billion to $3 billion) and the NY Post (saying $5 billion). Obviously, the WSJ is a bit more credible, but there is almost no conceivable scenario under which this deal makes sense. It's not anywhere near eBay's core competence, and while you could see some ways in which eBay could make use of a VoIP service, there's no way any such service could possibly be worth $2 billion to them. The Post says the two companies have been negotiating exclusively, but that exclusivity is about to end. Everyone admits that the deal might fall through, and if there really is such a deal, then you'd hope someone would come to their senses and drop it soon. No matter what, you have to give credit to whatever PR people Skype has drummed up to get these rumors going. The rate at which their supposed value inflated is truly stunning -- more so than just about anything seen during the original internet bubble years.
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Skype and Ebay
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Perhaps not Ebay as such...
Of course, this could be a bit of a spurious link that could be applied to anything... "Rumor has it that EBay is going to start gobbling up grocery stores because PayPal will make it easier to buy Snickers bars...."
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No Subject Given
$2B acquisiton price = price/revenue of 40x. Google/Ebay are trading around between 15x-20x price/sales.
Skype is growing revenues & earnings much faster than Google/Ebay.
Not that crazy.
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Re: No Subject Given
However, we're talking very different situations here. Google and eBay are both *profitable* businesses showing long term staying power. Skype has shown nothing of the sort. At the same time, Skype is now facing competition from very powerful forces with a lot of money who are in a position to completely give away what Skype charges for in an effort to boost other businesses.
Even more important, the ability to recreate what Skype has done would cost significantly less than $2 billion.
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Re: No Subject Given
the point is that on purely financial metrics skype is expensive but not insane. paying 40x/revs (when your own stock that is valued at 20x/revs) for what is arguably the fastest growing private company in existence (or perhaps even in the last 10 years) is simply not crazy. reasonable people can disagree as to whether its a good idea, but its not crazy.
also, not sure why you think skype isn't profitable. do you just make this stuff up or do you know their numbers? personally, i'd be a bit more circumspect without having insider knowledge of the financials.
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Re: No Subject Given
It behooves Skype to keep everybody in the dark regarding things like its real user base (not the pointless number of downloads), the takeup of its paid services, and its revenues. That way, using your "financial metrics" can't enter the equation and it's got to be valued on all its intangibles.
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